South Africa

Small Business Tax in South Africa: What You Need to Know

Small business tax in South Africa

Small business tax in South Africa can be a pain. Even though we all hate thinking and speaking about tax, the reality is that it is something we cannot avoid. SARS might be viewed as the bad guy but they have actually implemented a system to help small business owners. If you qualify as a small business corporation (SBC), then you might be able to pay less on your tax returns than you might have originally thought.

In this article, we will explain what you need to qualify as a small business corporation, and what that would mean for your tax returns. 

Who needs to pay Small Business tax in South Africa?  

Unfortunately, not all small businesses can qualify to register as an SBC. You will need to comply with a few requirements. For example, holding companies and trusts do not qualify as small business corporations. The requirements your small business will have to comply with consist of:

  • Natural Persons: All shareholders or members of your small business must be considered natural persons. Therefore, non of your shareholders or members can be an artificial “person” that is seen as an individual by law. 
  • Shareholders: Your shareholders are required to solely be invested in your business. Therefore, they may not hold any shares in any other private companies. 
  • Members: Your members are not allowed to hold any member’s interest in other corporate companies.
  • Gross Income: The total gross income of your company should not exceed R20 million for the tax year. 
  • Investment Income: Your investment income should not exceed 20% of your gross income. 

How Much Does a Small Business Usually Pay in Taxes?

There are many factors that will determine how much tax your business will need to pay on the completion of a tax year, and therefore, this amount will vary for each small business corporation. Factors that influence your payable tax include the number of employees your small business has, whether your business is based in South Africa or if it is only a branch of a larger international company, and of course, your annual turnover. As this can be a complicated process and you want to ensure that you do not over or underpay SARS it is advisable to employ the services of a professional tax practitioner to assist you in your small business tax in South Africa calculations. 

What is the Small Business Tax Rate for 2023?  

Small business tax in South Africa is a unavoidable reality. To help you estimate what your payable tax will be at the end of the tax year, there are a few brackets under which a small business corporation will fall, and your payable tax will fluctuate according to your yearly income. 

  • Taxable income of R1 – R91 250 = 0% rate of tax. 
  • Taxable income of  R91 251 – R365 000 = 7% rate of tax. 
  • Taxable income of R365 001 – R550 000 = R19 163 + 21%  rate of tax. 
  • Taxable income of  R550 0001 and above = 58 013 + 27%  rate of tax. 

When calculating your yearly tax owed it is helpful to rely upon and revert back to past expenditures. It also becomes important to ensure your payroll has been done correctly throughout the year. PaySpace is a cloud-native payroll system that can help you simplify these processes and help you with your small business tax in South Africa.

Contact PaySpace to find out how we can assist you in your payroll and tax processes.